Beyond Austerity.

Once again, Democratic Perspective had the privilege to interview famed economist, Dean Baker. In case you’re not familiar with Mr. Baker, he predicted the housing bubble and its effects as early as 2002. He is co-founder of the Center for Economic and Policy Research, contributor to, and the author of many books, including Social Security: the Phony Crisis, False Profits: Recovering from the Bubble Economy, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, and more.

We began the interview by asking for his thoughts on the European austerity programs and the election of the first Socialist president in France since 1981. He responded, “Austerity is not working very well. They have rising unemployment as the result of cutting spending and raising taxes. If you cut spending, you’re pulling money out of the economy. Europe counted on the markets compensating for it, but they didn’t. People have a chance to vote on it now. In France, (the) two (major) parties together got just over one-third of the vote. ”

When asked if problems in the US are comparable to Greece, he replied, “The US is not at all like Greece. In Europe, they think the US economy is booming. Greece is not predicted to turn around soon,” he continued. “Greece’s debt is 160 percent of the economy. It doesn’t have its own currency, so it doesn’t have a way out of it.”

As for what the US should do now. “It would be great to have more stimulus,” he said. “The Fed could do more, and work sharing would help.” (Work sharing is a program in which firms agree to reduce hours instead of laying people off. The federal government makes up the difference.) “Work sharing worked well in Germany,” he continued. “However, conservatism in thought means that we don’t draw from others’ experiences,” he said. “This is no greater government intrusion than unemployment insurance. The longer you’re out of work, the harder it is to get a good job.”

In response to a question about his thoughts on the book by Ed Conard, Mitt Romney’s Bain Capital partner, Baker said, “It’s striking for a couple of reasons: The extent to which he’s ignored what’s happened around us and the fact that he blames people who took out loans.”

“The book glorifies people getting rich. We do benefit from some investments, but not from his type of work as a venture capitalist,” Baker continued. “The idea that we should be thankful that he and Romney are good at finding tax dodges is absurd. I hope Romney has to comment on it. I think it’s completely off the mark and wrong and offensive.”
“No one I know is arguing that we should take over private enterprise,” Baker concluded. “It’s another thing to let them run wild.”

“We’ve seen a large redistribution of income from the 80s to now,” Baker said. “That has really persisted through the last few decades, except for the 90s. It’s driven by policy,” Baker continued. “It’s been caused by the deregulation of the financial industry, too-big-to-fail banks and insurance, as well as trade policy.”

“They’ve put our workers in direct competition with the lowest paid workers in the world. But they didn’t do the same for our highest-paid employees,” he said. “CEOs’ pay is not just unfair. It’s corrupt.”

“It’s not the same in Europe or Japan,” Baker said. “Our banks were on the dole. We could have put conditions on TARP (the Troubled Assets Relief Program), but didn’t. That was a missed opportunity. Bank of America is kind of the poster child (of the problems). It bought up Merrill-Lynch. ..There’s a long list of things. It’s hard to think of a better candidate for breaking them up, although JP Morgan Chase should be, too.”

Baker continued, “Much of the banks’ money has nothing to do with making things work. Much of what they do is take money out of others’ pockets.”

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